The Euro benefits as injection of liquidity from central banks improves risk appetite.

Tom Tong16/Sep/2011Currency Updates

GBP

Sterling rose against the dollar on Thursday, pulling away from eight-month lows as a coordinated move by central banks to address banks’ problems securing dollar funding boosted market sentiment, lifting riskier assetsand currencies. Gains were limited, however, with sterling seen vulnerableto more selling due to worries a weak UK economy could prompt the Bank of England to opt for further monetary easing.

EUR

The euro rose on Thursday following a move by the European Central Bank (ECB) to offer dollar loans to the region’s banks on a longer-term basis.
This new measure will relieve some of the pressure on European markets which have been in turmoil, particularly in the last few days. Despite the good news Greece remains a default risk, with investors predicting the rally to be short-lived.

The ECB has already undertaken a seven-day dollar loans system every week, which was utilised for the second time in a month earlier this week.
On the flipside, yesterday was the day when the euro crisis crept into France – where the banking sector has now become so vulnerable that even the French government is no longer in a position to rescue it without itself being drawn into the abyss.

USD

The dollar strengthened against most of its peers before a report today that may show consumer confidence rebounded from its lowest in more than two years, curbing speculation the U.S. economy is slowing down. “We’re not expecting the U.S. economy to return to double dip recession,” said Thomas Averill, a director in Sydney at Rochford Capital, a currency and interest-rate risk management company. “There’s quite a solid base in dollar-yen.

The dollar has risen 3.3 percent in the past month, the best performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.

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Written by Tom Tong

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